Over the course of my 15 years in Asia, I've seen a huge shift in the hospitality industry. When I arrived here in January 2000, the hotel market was similar to Europe's in its early days, more than a decade before.
The markets in Europe had been very closed, with many transactions sealed with a handshake in private members' clubs in London or Paris. There was very little transparency.
So too in Asia at the start of the millennium. The industry was dominated by wealthy families who executed deals among themselves. Outsiders had a hard time squeezing into the market.
Today there is far more information available. You can study property values, room rates, occupancy -- everything an investor needs to make sound decisions.
Another huge change has been the sheer volume of transactions. In 2000, $800 million worth of hotels changed hands. Last year, that figure was $7.5 billion -- nearly 10 times the volume in 2000.
As Asia's deal total grows, it closes the gap with Europe, where $13.2 billion in hotel properties changed hands last year. We've gone from terribly lean times in the early 2000s, when we might have worked on two or three deals a year, to pretty good times.
There was a lull after the financial crisis. We saw a record $10.3 billion in transactions in Asia in 2007, but that plunged to $2.1 billion the following year amid the global financial crisis and remained below $3 billion until 2011. The investors who had bought up properties in markets such as Japan vanished, as credit dried up and property values plunged.
Although some new funds have stepped in to fill the void, the powerful families that control the industry are still the driving force behind Asia's hotel industry. That is certainly the case in Hong Kong, Singapore, Malaysia and Thailand.
That said, real estate investment trusts (REITs) have been showing great interest in the market recently.
Sealed with a handshake
In one respect, the industry is like it was in the old days. In many transactions, you're dealing with the head of the company. Such people are thorough in their due diligence and tough in negotiation. But when they shake hands and say they're going to close a deal, they close it. You're not dealing with someone who has to report to a board.
Investors looking at Asia still want prime assets in Hong Kong, Singapore, Tokyo and Seoul. And we continue to see transactions in Thailand, in spite of the political unrest. The biggest challenge is that there's now very little hotel stock for sale around the region, with a considerable amount of capital chasing fewer deals.
So where do we go next? A savvy investor might look at the Maldives, where the number of visitors has doubled in a decade, to 1.1 million last year. China is now the top source of tourists there.
There's increased investment from Chinese companies around the region. The visitors are already here; the financial backing is on its way. But China is a source that the industry shouldn't rely on, for customers or capital. These could disappear as quickly as they arrived.
I think Sri Lanka is a destination with huge potential. It has a winning combination of features from a tourist perspective -- wonderful beaches and wildlife, delightful people, and it's very clean. You can stay on a beach for a few days, then head up to the mountains to stay at a tea plantation, and watch wild elephants troop past your door. It's just extraordinary.
There are also opportunities opening up in Myanmar. There are 2,000 international-standard rooms in Yangon, and about 4,500 under development. But the challenge is in the infrastructure -- the airport is currently undergoing a much-needed expansion, which is targeted to be complete by 2018.
The same is true in Cambodia. The opportunities are very exciting there and development is continuing to move forward. Siem Reap, near the popular tourist destination of Angkor Wat, has gone from 250,000 foreign visitors 10 years ago to 1.2 million last year. A decade ago, you had the choice of staying at the Raffles Grand Hotel or a few locally run places. Today there is still the Raffles, but you also have Aman Resorts, a Park Hyatt, and many other international brands to choose from.
Infrastructure and the hotel stock in Cambodia need to keep improving, but over time, we believe in the potential of what Cambodia has to offer -- history, fabulous beaches and food, and wonderful people. Development is proceeding at a steady pace rather than booming overnight; this will make it more sustainable, which is much better for the country and its people.
And finally, India. When I first started visiting India, Mumbai's primary hub, Chhatrapati Shivaji International Airport, was a bit of a shock for the international traveler. The airport was very old, not air-conditioned, there had been no capital investment for years, and there was only one flight per day to Singapore. Fast forward to today, and CSIA has expanded massively; it now offers all the modern comforts one would expect at a major airport. Passengers can take their pick of flights to the rest of Asia.
In many of these emerging markets, development of infrastructure is making it easier for people to do business and travel. Combined with improved air access, we're gradually getting there.
Scott Hetherington is CEO Asia of JLL Hotels & Hospitality Group.